Opinion: Want a truly fairer income tax system? Tax families

financialpost.com:

By Peter Shawn Taylor

Tax fairness is all the rage these days. The recent federal budget is titled “Fairness for Every Generation.” If that isn’t clear enough, Finance Minister Chrystia Freeland hammers home the point on the very first page: “We are making Canada’s tax system more fair,” she declares in her foreword.

But how fair can a tax system really be if it treats households differently even though they have identical incomes? If Freeland wants to make Canada’s tax system fairer, she’d drop her stale “tax the rich” routine and focus on this inequity at the very heart of Canada’s personal income taxes.

Regardless of their personal circumstances, all Canadians are required to file their taxes as individuals. Together with our steeply progressive tax schedule, this means that for any given total income, a couple with significantly unequal earnings will pay more tax than a couple in which both partners earn the same amount.

Consider two similar families living in Ontario. In the first, both parents earn $60,000. In the second, one parent earns $120,000, the other nothing. These two households have the same financial resources, yet the second family pays over $7,000 more a year in taxes (not including CPP or EI). Why? Because with our progressive rate structure, the single-earner’s second $60,000 tranche of income — from $60,001 to $120,000 — faces a higher marginal tax rate than the two separate $60,000 incomes earned by the first family.

According to Statistics Canada, 2.2 million couples in Canada rely on one income. Plus, an unknown number of the 5.1 million dual-income earning couples will have earnings unequal enough to trigger some form of tax penalty. In short, it’s not a trivial issue.

And yet we’ve had a fix